Nothing is more central to human flourishing than work. Other animals expend energy to survive. But man evolved to make conscious toil for food and shelter. This aspect of our heritage is reflected in a psyche that for most still requires work for contentment. Sigmund Freud was not right about everything, but he was certainly correct that love and work are the necessary conditions of a satisfied life.
While modern America has cleared out obstacles to love, however unconventional, it has put up more and more impediments to work. Begin with the tax code. It raises most income from labor, not consumption. As a result, the government discourages work more than is required to run its operations. Nor can the decision to tax labor heavily be justified by concern about inequality. For those who want their taxes progressive, a consumption tax can be made as progressive as an income tax.
Second, minimum wage laws prevent the least talented and able among us from participating in work.
Both California and New York have passed minimum wage legislation that will prevent in relatively short order their citizens from working for less than fifteen dollars an hour. The New York bill will double the minimum wage. The California bill will increase the minimum wage by fifty percent. Even in a political climate growing increasing hostile to liberty such legislation stands out as an egregiously irresponsible and ignorant intrusion on freedom.
We hear a lot about “denialists” when it comes to climate change, but these enactments represent a massive denial about basic truths of economics. When a commodity—in this case labor—becomes substantially more expensive, people will buy less of it. The result of these laws will more unemployment for the least able among us.
Does anyone doubt that if newspapers, including those who editorialize in favor of such increases, were required by the government to double their subscription price that they would sell substantially fewer newspapers? Or if the government decreed that salaries of tenured professors must be go up by half, that colleges would substitute other kinds of instructional tools for tenured professors?
This plebian reviewer read Professor Sir Anthony Barnes Atkinson’s Inequality: What Can Be Done? so you wouldn’t have to. Inequality inadvertently persuaded me that its topic is even less important than I’d thought it was when I began. But make no mistake, Atkinson’s a celebrated lion of the Left—the economist whom Thomas Piketty called “the Godfather of historical studies on income and wealth.” If he can’t persuade us inequality is a problem, no one can.
On Labor Day, we should praise employers as well as workers. In our economy employers make much of our labor possible by paying us wages. They make it more productive by arranging its structure most efficiently. They make it more forward looking by coming up with ideas for the next new product and service and by supplying the capital to get these ideas off the ground.
Yet many fail to acknowledge what a deeply moral act employing someone else in productive, legal work can be. By giving someone a job, an employer is not only providing a wage, but a framework of discipline and often a satisfying life that not everyone can provide for themselves. And large employers, like Walmart, do most of all by employing millions and creating paths for career advancement that would not otherwise exist.
In contrast, most of the shrill critics of companies like Walmart are academics and others who have never employed anyone except perhaps a nanny. They have done little to put bread on the table of their fellow man or set the less well off on a trajectory to a more ample livelihood.
I cannot remember a time when New York’s Governor and New York City’s Mayor taken together pose a greater threat to liberty and prosperity. Last week each proposed a dreadful policy. Governor Andrew Cuomo succeeded and Mayor Bill de Blasio failed. The different outcomes tell us a lot about what makes some statist proposals more likely to take effect and how to resist them.
Cuomo got his Labor Board to hike the minimum wage to $15 an hour for fast food workers throughout the state. I will not repeat my general arguments against substantial minimum wage hikes. But even minimum wage advocates concede that such sector specific wages will distort the labor market and create a less efficient mix of businesses. Moreover, any law that requires paying someone at McDonald’s in Troy, New York $15 an hour while someone working at Home Depot in New York City $9 an hour is patently irrational given the much higher cost of living in the city.
For his part, de Blasio proposed capping the growth of Uber in New York City ostensibly because the extra cars on the road were causing congestion, but in large measure because the taxi companies are some of his biggest supporters. Even if city streets were becoming more congested it is not economically rational to single out Uber. There is no reason to believe that the customers it serves are getting less benefit from driving around New York than those who take taxis or drive themselves.
What is interesting, however, is that the city council shelved this proposal.
With President Obama’s call (link no longer available) to raise the national minimum wage to $10.10 per hour, Americans have been divided on how this would affect businesses and workers. Many opined that an increase would pull millions of workers above the poverty line, stimulate business profits, and even benefit taxpayers by reducing the number of citizens on food stamps. In reality, raising the national minimum wage would harm the very people it’s intended to help. By forcing business owners’ hands on the matter, the government would accelerate unemployment, diminish resources and profits for businesses, intensify the social divide, and undermine the…
I live in Chicago, which is a badly governed city in the worst governed state in the nation. And it has just made another serious mistake, raising its minimum wage to $13.00 by 2019 and to $10 by next year. Ultimately, the new minimum will represent an increase of more than 50 percent over the present one.
Many of the criticisms of minimum wage are well known. For instance, it tends to increase unemployment and this effect falls most harshly on the least skilled. Moreover, earned income tax credits are a superior, targeted way of helping the poor. But there are some very unfortunate aspects of this decision that are peculiar to Chicago and the time in which we live.
First, Chicago is part of a much larger metropolitan area.
President Obama would like to legalize the vast majority of immigrants who came into this nation illegally. Indeed, his commitment is so strong that he appears to be considering suspending deportation and giving work authorization to a large number of them this fall. But the President’s immigration policy is in tension with his economic policy. Labor market restrictions and other burdens on companies – imposed and proposed – make it less likely that these immigrants, most of whom are relatively unskilled, will be able to find steady work. As a result, they are less likely to be assimilated into American society—a harmful result not only for immigrants but also for the rest of us.
For instance, raising the minimum wage makes it harder for the least skilled workers to find jobs, particularly in age when it is increasingly possible to substitute technology for unskilled labor. The President’s advocacy of a much higher national minimum wage is especially harmful. Many of the immigrants live in low cost jurisdictions, like Texas, where the distorting effects of a high minimum wage are the likely to be greatest. The disproportionate effect on low-cost-of-living states is no accident. The President was elected largely by states with higher costs of living, where the additional costs often stem from onerous regulations. These states want a national minimum wage to stem competition from lower cost jurisdictions.